Advice from Nina Kaufman, Part II
June 18th, 2008
Here are points four through six of the great advice our finalists received from Nina Kaufman, Esq., a New York attorney who specializes in small business and entrepreneurship. www.askthebusinesslawyer.com.
4. Business partners
People use the term “business partner” loosely . . . which makes attorneys cringe. “Partner” is a word that has a legal connotation. If you refer to someone as your business partner, there is an assumption that that person will have an ownership interest in your business and be responsible for a commensurate share of the debt. There’s no rule of thumb as to when it’s right to bring on a business partner. However, budding entrepreneurs are often feeling so grateful for whatever helpful ideas, concept-honing, and moral support comes their way, that they fritter away pieces of their company before they realize it. Once a business partner is in your midst, it’s a torturous process to get them out (unless you’ve worked out the formalities in an agreement).
Here are examples of potentially problematic business partner arrangements:
· A former colleague, who works full-time for another company, “helps out” with product design on occasion. Is her contribution really worth 50% of the company?
· A family member was promised a small share of equity as “thanks” for his role in shaping the concept for the company’s first product. There are now several more products to which the family member contributed no intellectual capital (or financial, for that matter). Does Uncle Joe continue to deserve the same percentage of what’s now a bigger pie?
· Two owners agreed to spit the business 50/50, but now one is making noises that she deserves a bigger piece because she’s the “face” of the business, whereas the other is the “back office.” Is that fair?
That’s why a partnership/shareholder’s/operating agreement is so important. It answers these questions from the outset – before they fester. A business partner may need to leave the business for any number of reasons – they could die, become disabled, feel a calling to do different work, or hate your guts. When they leave, it’s not as simple (legally or financially) as, say, chopping down a tree. You have to uproot the tree. The partnership agreement will outline exactly how you can do that.
5. Doing business online
Doing business online is not as different from doing business face-to-face as people think. You still have a purchaser and a seller. You still have a good or service to be offered/provided. And, if something goes awry in the relationship, you still need to have a method and a place for resolving disputes.
That’s why having privacy policies (“what CAN we do with the email addresses we collect?”) and terms and conditions (“where will we go if we have a disagreement?”) are so important. If you don’t have those on your website, you leave yourself vulnerable. For example, if your business is in Maine and your dissatisfied purchaser in is California, you leave yourself open to having to schlep to California for the lawsuit . . . unless you indicate in advance that all disputes will be resolved in Maine. For ideas for what to include in your privacy policies and terms and conditions, take a look at what others in your industry have included. And then run them by an attorney to make sure there’s nothing else that should be included that hasn’t been.
6. Finding an attorney who’s right for my needs
Sometimes, it feels as elusive as trying to find the Holy Grail. Or the perfect boyfriend/girlfriend. How can you find the right attorney for your business needs? What should you ask? Here are a few guidelines:
· Ask for referrals from other business owners. Not all attorneys have the right match of skills for you. An attorney specializing in anti-trust litigation for Fortune 500 publicly-traded companies is not likely to also be dealing with brand-new start-ups, or conversant with the issues they face (like business formation). An accountant who works primarily filing tax returns for W-2 employees may not be as savvy about the ins and outs of small business taxation as you need – or have the mindset to work proactively with you. If you ask other business owners who they use or know of, at least you have a fighting chance (over the Yellow Pages) of reaching one with the experience you need.
· Consultation Fees. Before setting up an appointment with an attorney (or any professional) ask first whether you will be charged for the consultation and if so, how much. [I actually made that mistake once – I was billed for a 20-minute telephone consultation – because I assumed that my own willingness to assist a fellow/sister lawyer gratis was something others would abide by, too. 
Guess there’s no professional courtesy among sharks. ]. Also ask if the consultation fee is eventually deducted from any retainer payments, should you choose to work with that attorney going forward). Do not assume that the attorney will give his/her time for free.
· Rates and payments. Assuming you’ve found an attorney with the area of specialty you need, make sure you’re clear about how he/she charges for services. Hourly rate? Project basis/flat fee? Monthly retainer? Payments in advance? Asking these questions may be awkward, but a lot less awkward than being surprised by a bill you didn’t anticipate.
· Listen to your gut. Attorneys and other professionals are a crucial part of your advisory team. You want to feel good about having them on board. You want to feel that they respect the efforts you are making to create something new; but you also need to respect them for their expertise and (sometimes) be willing to set your own headstrong ideas aside and liken to expert advice. What does your gut tell you about the attorney you’re meeting? Would you enjoy working with them? Would you feel comfortable asking them seemingly simple questions (if not, you may deprive yourself of an opportunity to glean valuable information)?
Nina L. Kaufman, Esq.
AskTheBusinessLawyer.com
